The Republic of Indonesia is one of Asia's up and coming industrialised nations. It is headed by a President who is elected every 5 years by the Peoples' Consultative Assembly (MPR), comprising 400 presidential appointed members; 100 army appointed members; and 400 publicly elected members.

Geography, Climate and Population

Indonesia consists of 17,508 islands covering 1.9 million km2 along the equator between the Indian and Pacific Oceans. The country extends 5,100 km east to west, and 2,100 km north to south. Lying as it does on the edge of two continental plates, it has large numbers of active volcanoes and is subject to frequent tectonic activity.

Being on the equator, the Indonesian climate is monsoonal and humid. Thus there is a year round growing season. Very wet monsoons may restrict timber cutting while prolonged dry periods can result in water shortages that can make water transport of logs difficult.

Only 6,000 of the islands making up Indonesia are inhabited. Of these, four are home to 95% of the population of 191 million (1994). This makes Indonesia the fourth most populous country in the world. The population doubling time is 43 years. Current estimates put the population at 237 million in 2010.

Economy

In 1993 GDP was estimated to be US$730 per capita. To date economic growth has been fuelled by the export of oil and gas. However, since the mid-1980s, active deregulation by the government has significantly broadened the economic base. This is leading to changes as shown below.

Major Economic Sectors as a Percentage of GDP

1990

2000 (forecast)

Agriculture (inc forestry)

20%

15%

Manufacturing

15%

23%

Oil & Gas

18%

11%

Construction

6%

7%

Other services

34%

36%

(source - World Bank)

The economy of the country has been growing steadily through the 1990s with growth rates in the 5-7% range. Per capita GDP is forecast to increase by about 50% by 2000.

At this rate of growth, Indonesia joins China, Malaysia and Thailand as the four Asian nations most likely to emulate the successes of Taiwan, Hong Kong, South Korea, and Singapore.

Forestry is a significant employer providing work for about 2% of the total workforce - about 3.7 million jobs, sustaining at least 15 million Indonesians.

Forests

The Ministry of Forestry has classified 75% of the land area as being within forest boundaries. This equates to 144 million hectares. This however does not all carry forest, nor does it signify that the forest that may exist has commercial wood production capability. A 1990 FAO report puts the area of forest at 109.5 million hectares (57% of land area), and some environmentalists put the area as low as 98 million hectares (51 % of land area).

There are at least 19 different forest types in Indonesia, including coastal forests on beaches and dunes; tidal forests such as mangroves, nipah, and palm; heath forests associated with poor sandy soils; and peat, swamp, wetland, evergreen, bamboo, savanna and montane forests. Of the 4,000 species of trees in Indonesia, only 120 hardwood species are recognised as being suitable for commercial use. Of these, about 48 (mainly Dipterocarp spp) are used in the plywood industry.

Of the official figure of 144 million hectares, 34% is designated for protection and National Parks, and 21% is designated for conversion to other uses. The remaining 45% is managed for timber and other forest product production.

FAO estimates that in 1990 there were 46 million hectares of virgin production forest in Indonesia, but forecast that this would be reduced to 11 million hectares by 2000.

Secondary forest products, such as plywood, sawn timber, rattan and paper are the most important non-oil exports. These earned $US5.15 billion in 1993, and accounted for 25% of total industrial exports.

Indonesia has 10% of the world's tropical forests, 60% of Asia's tropical forests, and a significant proportion of the world's remaining virgin stands. These forests are home to vast numbers of animal and plant species and people. Thus their value is substantially greater than simply their ability to produce wood and associated forest products.

The country is also developing fast growing plantations under the HTI (Industrial Tree Estate) programme. These plantations cover about 1.34 million hectares (1994) with the majority being Teak (67%); Pine (23%); Mahogany (8%); and Agathis. The government plans to decrease production from natural forests by 2% per year, and increase the reliance on plantations with a goal of having half the country's wood production sourced from them by 2020. The plantation programme is envisaged to eventually convert 6.2 million hectares of unproductive forest land into industrial plantations by 2000. About 1.8 million hectares will be Teak.

Fuelwood places a significant demand on the forest resources with an estimated 150 million m3 gathered annually. However, this is not seen as a major cause of deforestation, unlike in many other countries, despite its notable role in Java.

Post-war deforestation is largely attributed to shifting cultivation, population resettlement programmes, and commercial logging. To blame these three factors alone, however, is simplistic.

Rubberwood is a source of supply that has not been fully utilised in the past. The Rubberwood International Trade Centre estimated in 1993 that Indonesia used only 27% of its economically available rubberwood resources. Rubberwood is used as a substitute for other hardwood species in every part of the forestry sector. Harvest levels in 1994 were 925,000 m3, but only 250,000 m3 (27%) were processed.

Forestry Policies

Central Policies

The National Forest Policy of Indonesia, in common with all development, is based on:

· Pancasila, the Five Philosophical Principles of the nation;· the 1945 Constitution;· guidelines of state policy set out each five years under the National Development Plans;· the directives of the President; and· the Kaliurang declaration of 1966 on sustained yield.

These embody the development and preservation of forests for national development; the good of the people; ecological balance; promotion of industry; and conservation of the environment. The main objective of the National Forest Policy is to guide forestry activities in supporting national development. It is a dynamic policy instrument designed to respond to national and international issues.

Until recently, the primary objective of Indonesia's forest management plans was to generate revenue to replace oil and gas export earnings. That phase of exploitation is now passing, with the Government turning attention towards protection of the environment and sustained yield management of the forests, to support a forest-based industry.

The Ministry of Forestry developed the National Forestry Action Plan (NFAP) to coordinate forestry goals with the five year economic plans (Repelitas). For example, from Repelita I through IV (1969-1989), the long term national goals were:

· to open up the outer islands for forestry development;· rapid development of forest-based industries;· to achieve market power in its forest products.

Overall, this Repelita recognises the need to rehabilitate production forests through the establishment of plantations, which will support the continuity of forest industries and promote export-oriented industries.

Plantations

The development of plantations is a significant step forward as Indonesia strives to retain a forest-based industry as a major contributor to the economy, while at the same time achieving a more balanced use of natural forests.

Concessionaires, state enterprises, provincial forestry services, and other organisations are involved in the implementation of the HTI programme. HTI contracts are made with the Ministry of Forestry, which regulates the management of timber estates. In 1990, however, HTI agreements were replaced with HPHTIs or Concession Rights for Industrial Estates. These concessions are for 35 years, with a possible extension by one cutting cycle.

Government regulations stipulate that unproductive or empty forest lands may be converted to HTIs. "Unproductive" land refers to forest where the potential volume of commercial species with a diameter of 30 cm or more, is less than 20m3 per hectare. The programme applies to single species plantings of introduced species such as eucalyptus, acacia, albizzia, and mahogany.

Recent Development

Repelita VI (1995-1999) further modified the focus of forestry which is expressed in the country's Forest Action Plan. The Plan proposes 9 programmes which include:

· conservation of living natural resources and their ecosystems;· land use and forest inventory;· forest protection;· soil and water conservation; improvement of natural forest management;· improvement of forest land productivity and establishment of industrial plantations;· improvement of the efficiency of forest based industries;· promotion of people's participation in forestry development;· institutional and human resources development.

The Ministry of Forestry has established a permanent mechanism for coordination within the country of various donor projects. This mechanism was institutionalised by decree in late 1994.

Non-Forest Policies

While the consideration of policies relating directly to forestry provides some understanding of what is occurring in the country, many non-forestry policies have considerable bearing on the future of forested areas.

In general, forest policies include those which are intended to affect the utilisation and conservation of forest materials. They are controlled primarily by the Indonesian Department of Forestry, and include such policy instruments as stumpage fees, log export taxes, concessions, and reforestation programmes.

Non-forestry policies include all those other government agencies which, intentionally or otherwise, have significant impact upon forest use, but which were primarily intended to further non-forest objectives. Examples include resettlement, general tax and agro-conversion policies, and even exchange rate policies.

Forest Impacts of Policies

From these policies, a number of factors evolve which impact upon the forest. Chief amongst those factors which encourage poor utilisation of the forest, or commonly, its destruction, is endemic poverty and the effect of institutions governing both property rights and access to virgin forest stands.

Poverty has declined rapidly in Indonesia but is still substantial. Poverty usually impacts on forests by way of shifting cultivation and fuelwood collection. A study presented by ITTO suggests that shifting cultivators account for 59% of deforestation, while logging only accounts for 9% of deforestation. Regardless of who actually removes the forest, until the underlying issue of rural poverty is adequately addressed, deforestation may continue unabated. This raises two questions, which are difficult to answer with any certainty.

Firstly, the distinction between forest quantity and forest quality must be addressed. While logging may not result in "deforestation" per se, it may result in a significant reduction in the quality of the forest, as measured in both economic and environmental terms, i.e. the issue of forest degradation is as significant as deforestation.

Secondly, the question arises as to what the cause and effect relationship is. In many instances, access provided by logging results in shifting cultivators moving into an area and removing the remaining forest. Thus, attributing responsibility for removal of the forest is at best an inexact science.

The institutional framework within which forest utilisation has occurred has interacted with both poverty and public policy, to yield rates of forest consumption which, in all likelihood, have exceeded that which private owners of virgin forest land would allow. The institutional framework includes not only the process for assigning property rights to the forest, but also their enforcement (hindered by an inability to restrict forest access), as well as the assignment of responsibilities across government departments.

The government of Indonesia owns all property rights to the natural forest through provisions established in the 1946 Constitution. The rights may be temporarily assigned for 20-25 years (e.g. a timber concession), or irrevocably transferred to private parties (e.g. title to forest land issued to transmigration families).

The effects of this are twofold. Firstly, there is resentment between local people using the land for their existence and any party which has been granted rights to the land (e.g. for logging). Secondly, as the concessionaire has no long term interest in the land, there is no incentive to strive for long term sustainable management.

Land Tenure

A cultivator's willingness to manage land in a sustainable way is closely linked to land tenure. Without secure tenure, there is no incentive for people to manage the land in a sustainable way. Sustainable management is an investment in the future. Without the security of knowing they can reap the rewards of that investment, people will not make the investment. Central government laws that do not take into account traditional land tenure systems are difficult to implement, and will create problems in the future. As there is no written title, a better understanding of traditional land tenure systems is required.

Traditional (or Adat) rights to land are formally recognised, although they are subject to varying interpretation within Indonesia's Basic Regulations on Agrarian Principles. Formal recognition of indigenous peoples' claims on their land, and the putting of that recognition into practice, is required in order for efficient management to take place.

Many Indonesian laws are said to be written with a supremacy of the national perspective in mind. For example, Article 5 defines rights of ownership (hakmilik) in the following way: "The Agrarian law which applies to earth, water, and air is Adat law (traditional) in so far as it is not in conflict with the National and State interests based on the unity of the nation."

A problem with applying Indonesian law to shifting cultivators is illustrated in Article 7: "In order not to harm the public interests, excessive ownership and control of the land is not permitted." "Excessive ownership" in densely populated Java is very different to sparsely populated Kalimantan. However, increased land tenure security is as important in Kalimantan as it is in other parts of Indonesia.

Similarly, Article 10, written to minimise problems with absentee landlords, ignores the fact that forest fallow periods are necessary to maintain soil fertility and productivity in a shifting cultivator regime. Article 10 states that: "every person and corporate body having rights to agricultural land is in principle obliged to cultivate or exploit it actively by himself", which further enshrines the "use" philosophy as opposed to sustainable management.

Indonesia - Summary

Progress has been made in the development and implementation of a Policy which comes from a philosophy of sustainable forest management in Indonesia although some believe that the progress is almost "too little too late". The progress to date has seen policy move from one of encouraging the removal of forest as an impediment to development (especially to agriculture), through a period of aiming for sustained yield (of timber), to the current statements on sustainable forest management.

In recent years there has been strengthening of the institutional framework and greater involvement of NGOs which often represent interests other than timber production. There has been greater focus on inventory of both forest and land resources, and efforts made to rationalise the use of both. There has been the introduction of reporting systems, and in particular a move towards environmental impact type reporting. Much greater weight has been placed on non-wood forest values and the role of rural people in the long term management of the forest.

Future Policy towards 2010

As previously discussed, forestry policy can not and does not operate in isolation. Key policy decisions in other sectors, especially those relating to taxation, finance, regional development and migration, will continue to impact significantly on the forestry sector.

Some moves have been undertaken already which have also had some flow-on effect. For example, the 1945 Constitution reserved an important position for the State in the operation of the economy. However, there is now an increasing appreciation of the efficacy of competitive private firms in allocating resources.

It is said that a successful replacement of the corrupt and inefficient customs service had a strong psychological impact throughout the bureaucracy and the state enterprises. No longer is it taken for granted that everything that really matters should be in the hands of some arm of government.

One of the most significant constraints to modernisation of the economy is the reported weakness of the legal system. There is reference to poor remuneration of judges and prosecutors, lengthy delays in getting resolution, and lack of guarantee of a fair outcome, all of which may offer fertile grounds for corruption, and a good reason to find some other method of resolving matters. If there were greater certainty of fair and equitable resolution of disputes, a higher level of compliance with forest laws and a higher level of detection and conviction through a more effective judicial system, there should be greater attraction to the forestry sector including greater private sector confidence in investing.

There have been few privatisations of state-owned firms as yet, but growth of the private sector is being achieved more subtly, at least in some cases, simply by allowing the private sector to compete on more even terms.

There are some key matters to address within forest policy also. Firstly, forest policies, under the control of the Forest Department, have been strongly focused on the value of wood products, and the economic and social value of other agricultural use of virgin forest lands. This narrow policy focus has become the principal barrier to reform of policies impinging on tropical forest utilisation, and is the principal underlying reason for policy-induced deforestation.

Sustainable development of tropical forests that will protect the human and biological diversity which characterises such forests, would appear to require that several important policy initiatives be considered, including:

· containment, regulation and enforcement of obligations of timber companies which, to a considerable degree, have a free rein in the forests;

· granting of long term unambiguous rights to significant areas of forest to local people with local control and management;

· stabilisation of populations through revision of transmigration policies and birth control;

· increased involvement of "wealthy" nations in providing financial resources to aid in the development of sustainable forest management practices, and protection of significant areas;

· correction of market failures which currently encourage wasteful or excessive utilisation of forest resources;

· developing and prioritising research and information needs in order to better manage forest resources, including plantations;

· clarification of roles of various government agencies to better define objectives and outcomes, and to eliminate inter and intra agency conflicts.

There appears to be an urgent need for high level political recognition of the legitimacy of participation of all affected parties in developing forest policy in the future and the removal of obstacles to the empowerment and participation of weak or disenfranchised groups with a stake in the development of forest policy. Achievement of this goal will improve "buy-in" by those parties and will assist in having all parties working to common, mutually agreed objectives.

Bearing in mind the great diversity in cultures and traditions in the country, of special significance is the need to review the ownership of forest resources and land. The objective of such a review would be to produce a coherent and authoritative statement of law and policy regarding recognition of customary land rights under national law, to clarify how they are to be exercised and to ensure that the people who "manage" forests have security of tenure and therefore an incentive to aim for long term sustainable forest management.

Furthermore, before major achievements can be attained there is a pressing need for information and research on the forest resources and their management. Without such information any policy initiatives will at best be hopeful guesses. This is likely to require resources from both within and outside the country and should be carried out in a collaborative manner involving donors, internal institutions and NGOs.

Indonesia has been one of the great producers of tropical timber and continues to be so. This situation cannot continue indefinitely and is likely to be severely curtailed sooner rather than later unless major deliberate efforts to ensure that the resource is sustainably managed are made. This requires urgent and concerted effort by all parties, and in particular a major commitment from the government.

Implications of Inappropriate Action

The relatively rapid population increase in Indonesia will inevitably stretch the ability of the forest to continue to provide the resources people need or want. In particular, industrial wood for processing, fuelwood for domestic consumption, and non-wood forest product supplies will be jeopardised.

The longer the delay in moving to sustainable forest management practices, the lower the level of any sustainable supply of goods will be. Sustainable forest management will not eventuate by decree or regulation - it results from people seeing the long term benefits of implementing such practices.

Failure to address land tenure issues; to control harvesting operations; and weaknesses of government and regulatory authorities results in continued large scale unsustainable management practices. These in turn reduce the future potential for sustainable management.

Forest resources are not easily replaced once they are lost. Replacement imposes an enormous demand on capital, with a substantial period of time before any returns are realised. In purely economic terms, it is often better to manage the existing forest than to attempt to replace it once it is lost. In social terms, this may be even more imperative.